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District Court of Appeal, Second District, Division 1, California.


Civ. 9954.

Decided: May 13, 1936

Meserve, Mumper, Hughes & Robertson, of Los Angeles (William Larrabee, of Los Angeles, of counsel), for appellant. Guy Richards Crump, Roy W. Colegate, and Mark S. Feiler, all of Los Angeles, for respondent.

Defendant appeals from a judgment of the trial court entered against it and in favor of plaintiff for $2,010 and interest, for the alleged conversion of three bonds of the Province of Alberta, Dominion of Canada. The evidence discloses facts as hereinafter stated.

The bonds carried a face value of $1,000 each and their combined market value was $2,010, at the date of the alleged conversion, January 4, 1932. These bonds were originally, along with others belonging to plaintiff, in the possession of a firm of brokers named Buchan & Company, in Calgary, Alberta, Canada.

On December 30, 1931, as indicated by letters on file as Plaintiff's Exhibit No. 2 herein, Harold E. Crowle, attorney for plaintiff at Calgary, Canada, having procured the bonds from Buchan & Co., forwarded the bonds to the defendant bank at Granum, Canada, for safekeeping and requested that the bank hold the same to the order of Jacob Byer, the plaintiff, of 604 California Bank building, Beverly Hills, Cal., the address given being that of one Mr. R. T. O'Brien, which was some time prior thereto the address of the plaintiff as well.

On December 31, 1931, the defendant bank acknowledged the receipt of the bonds “to be held for safekeeping on account of Jacob Byer,” the plaintiff. On January 2, 1932, Mr. Crowle, at the request of Mr. Byer, wrote defendant bank stating that these bonds were to be considered as being in the custody of Walter Byer, son of Jacob Byer, in care of defendant bank. On January 4, 1932, a telegram, which was received at Granum at 11:40 a. m. Granum time, was sent to defendant bank by O'Brien over the name of Jacob Byer, in words as follows: “Please forward immediately to this address the bonds and stock forwarded to you by Harold E. Crowle, Barrister, Calgary, namely three thousand Alberta bonds * * *.” These are the bonds in question. On March 2, 1932, Mr. Crowle directed a letter to the defendant bank stating that he had been informed that the bonds had been sent to Mr. O'Brien, requesting to know if this was a fact and if so he wished to be informed by what authority the bank had sent the bonds to O'Brien. On March 3, 1932, the defendant bank wrote Mr. Crowle stating that on January 4, 1932, the defendant bank had sent the bonds by registered mail to Jacob Byer, addressed to 604 California building, Beverly Hills, Cal., in response to the above said telegram purporting to be from Mr. Byer, requesting the bank so to do.

On July 27, 1932, Mr. Crowle, in behalf of plaintiff, made a demand by letter on the defendant bank for the bonds or others of the same value, or the cash equivalent therefor. On August 6, 1932, the defendant bank wrote Mr. Crowle disclaiming all responsibility and liability in the matter.

It may be deducted from stipulations of counsel that the letter hereinbefore mentioned, from Crowle to the defendant bank, dated January 2, 1932, should have been received January 4, 1932, as it was stipulated that it was received “in the usual course of mails”; it being further stipulated that January 2d was a Saturday, January 3d a Sunday, and January 4th a Monday, and that defendant bank was closed on Sunday, January 3d. Evidence discloses that the bonds were sent on January 4th by registered mail, not insured, without requiring identification from the recipient, and that they were receipted for by someone in O'Brien's office without plaintiff's consent. O'Brien received the bonds and kept them, and plaintiff never received the bonds nor their equivalent, nor their value.

The plaintiff executed and delivered a power of attorney to O'Brien in his personal capacity on the 18th day of December, 1931, to act for the plaintiff, referring “especially to that particular transaction involving the collection of certain securities belonging to” him “and which said securities” were then “in the possession of Buchan Company, Brokers,” and which power of attorney further granted to Robert T. O'Brien full power of attorney to act for him, to accept, receipt for in his name “any and all documents pertaining to the collection of the securities above mentioned and to do all that may be necessary in the premises,” referring, as securities, to the bonds in question. This power of attorney was revoked by oral revocation on December 31, 1931. On January 18, 1932, plaintiff delivered to O'Brien, at Beverly Hills, Cal., a written notice of revocation and cancellation of his power of attorney, and on the same date plaintiff wrote the defendant bank to that effect. However, pursuant to the telegram received January 4th, purporting to be from plaintiff, the bank had already sent the bonds to O'Brien's office directed to plaintiff.

The question arose whether the power of attorney constitutes O'Brien an agent of the plaintiff to the end that it relieved the bank from any liability for negligence, in that the defendant bank neither insured the bonds, nor requested, in registering them in the mail, that they be delivered to the addressee, the plaintiff only, nor demanded identification of addressee. The evidence does not reveal that the defendant at the time of the transmission of the bonds knew that the power of attorney had been executed and delivered, or in fact, knew anything of such purported agency. If there existed any agency at all, O'Brien was a special agent to receive the bonds. “An agent for a particular act or transaction is called a special agent. All others are general agents.” Section 2297, Civ.Code. As stated in Ernst v. Searle, 218 Cal. 233, at page 238, 22 P.(2d) 715, 717, “It was therefore incumbent on the defendant to inquire as to the extent of his authority.”

The bonds were forwarded to the defendant bank by the plaintiff's attorney, Mr. Crowle, on December 30, 1931, with the instructions that the defendant bank hold them to the order of defendant “Jacob Byer of 604 California Bank Building, Beverly Hills, California.” The defendant received them and acknowledged receipt on December 31st, and on January 4th following, at 11:40 a. m., the defendant received a telegram at Granum, Alberta, Canada, over the name of the plaintiff, sent by O'Brien, who was holding the power of attorney, to forward the bonds to plaintiff, giving O'Brien's address.

The evidence does not reveal that the fact that O'Brien held such a power of attorney was known to the defendant bank at the time it sent the bonds to O'Brien's address, but does reveal that it only learned of this fact later.

Is the defense that O'Brien held a power of attorney, given by plaintiff, available to the defendant bank as a defense, without a showing that the defendant knew of the existence of such agency, if it existed? We think not. The case of Rodgers v. Peckham, 120 Cal. 238, 52 P. 483, 484, cites the case of Harris v. San Diego Flume Co., 87 Cal. 526, 25 P. 758, to the effect that a “party maintaining that an ostensible authority existed must prove that he knew of the facts giving color of authority to the supposed agent.” (Italics ours.) So, also, the Case of Luft v. Arakelian, 33 Cal.App. 463, 165 P. 712, 713, lays down the rule: “It is well settled that he who seeks to charge a supposed principal with the obligations resulting from the acts and conduct of an alleged ostensible agent must show that he himself was cognizant of the facts which gave color to the alleged ostensible agency, and caused him to believe that the person he dealt with was acting in the capacity of an agent rather than as a principal.” We are of the opinion that the defendant cannot avail itself of the defense that inasmuch as O'Brien held a power of attorney, it (the bank) was acting with the plaintiff through plaintiff's agent O'Brien, as the evidence does not disclose that defendant bank was cognizant of the power of attorney at the time the bonds were sent.

The power of attorney was properly admitted in evidence. The matter therein contained was logically relevant to the issue (22 Cor.Jur. 158, 192), and its probative force was brought into question by the examination of the witness Jacob Byer as to his relations with Mr. O'Brien.

It cannot be maintained that Jacob Byer, by his admitted words to O'Brien, “Whatever you are doing, you are doing on your own hook,” consented that O'Brien should act for him as an agent in procuring the bonds from the defendant bank. On the contrary, it shows his emphatic disapproval of O'Brien's proposal to get the bonds, and denies agency to O'Brien. Nor was it known to the bank that such a conversation had taken place. So, also, the fact that Byer had furnished the bank with the very address of O'Brien as his address to which the bonds were to be sent cannot excuse the bank for its carelessness in not demanding an identification by the mail carrier of the recipient of the bonds, nor its failure to insure them, nor its failure to request that they be delivered to the plaintiff only.

The issue is also before the court to determine whether the defendant had exercised the ordinary care required of it as a bank that accepts bonds for safekeeping from its depositors and rents safety–deposit boxes to its clients; and also, whether such negligence, if any, of defendant contributed to the loss of plaintiff's property. It must be conceded that the utmost faith is shown by depositors in entrusting valuable documents to banks for safekeeping as well as in the transactions of business.

We need first to determine, however, the question of negligence before considering whether an action for conversion lies.

“The true measure of liability is that the bailee is bound to that degree of diligence which the manner and the nature of his employment make it reasonable to expect of him, and that anything less than this is culpable in him.” 6 Cor.Jur. § 57, p. 1119, and cases cited. What was “reasonable to expect” of defendant bank? The bonds represented a considerable sum, $2,010. They were admittedly not its own. The defendant bank was intrusted with them. We are of the opinion that it was “reasonable to expect” of the bank that it use every available precaution without suffering a detriment or loss to itself. That the defendant used the mail service is not objected to. But having used it, the defendant bank should have availed itself of all the safeguards the service offered. This it did not do. The question whether the defendant bank was a bailee for hire is broached here. We are of the opinion that it was such a bailee. It was undisputed in the evidence that plaintiff at the time the bonds were transmitted had a safety–deposit box at the bank and was carrying a deposit there. While the bank as far as the evidence discloses may have received no “hire” for the very act of keeping the bonds on deposit, yet leaving the bonds on deposit in the bank was a privilege granted the plaintiff as one of its depositors, and that on plaintiff's deposits and the safety–deposit box the defendant bank did receive a compensation must be conceded, and to that extent the defendant bank must be held to have been a compensation bailee, a depositary for hire, and the bailment a benefit for both parties. While the act of the defendant bank, in mailing the bonds without demanding identification, was an unintentional failure to act according to law, and no doubt was done in good faith, yet great care was exacted of the defendant to see that the deposit, the bonds, got into the hands of their owner, if transmitted. But aside from this, at all events the evidence discloses that the bailee, even though we hold the bailment to have been gratuitous, did not exercise the same care with reference to the bailment, the bonds, that an ordinarily prudent and careful person in its situation would have bestowed upon his own property of the same character. 6 Cor.Jur. § 65, p. 1127, and cases there cited.

In the case of Greer v. Los Angeles Athletic Club, 84 Cal.App. 272, 258 P. 155, the defendant kept a fireproof safe in the clerk's office for the safekeeping of packages deposited therein by lodgers or other members of the club for which no special charge was made. While this case deals with an inn–keeper's liability under Civil Code, § 1860, at the bottom of page 282 of 84 Cal.App., of page 159 of 258 P., of the case just cued, the court does answer the query as to whether the defendant bank herein received compensation when it classes the bailment as one for hire, stating: “Manifestly the bailment, in a case like the present, is of the latter class, for, while the customer pays nothing directly, or co nomine, for the safekeeping of his effects, the dealer receives his recompense in the profits of the trade of which the bailment is a necessary incident.” (Italics are ours.) And referring, on page 283 of 84 Cal.App., on page 160 of 258 P., to cases cited, the court further states: “These cases are clear expressions of the law applicable to the situation developed in the instant case where any depositary accepts property as incidental to services rendered by the depositary, holding that the relationship between the parties is one of mutual benefit, and the depositary is a bailee for hire.” (Italics are ours.)

We must conclude that the defendant bank was a depositary for hire and that it was grossly negligent in not demanding, as it could have, that the bonds be delivered to plaintiff only, and that the recipient be identified.

It is asserted that the plaintiff, himself, was negligent. The evidence does not sustain such an assertion and if so it does not excuse the negligence of the defendant. It is not material here whether the plaintiff acted negligently. We are dealing with the acts of the bailee.

This brings us to the question as to whether an action for conversion lies here. The case of Hall v. Boston & Worcester R. Corp., 14 Allen (Mass.) 439, 92 Am.Dec. 783, specifically holds: “A misdelivery of property by any bailee to a person unauthorized by the true owner is of itself a conversion, rendering the bailee liable in trover, without regard to the question of due care or degree of negligence. This is a well–established legal principle, applicable to every description of bailment.” It is not disputed that plaintiff had the right of possession of the bonds in question. The previous demand was made here as disclosed by the evidence. 5 Cal.Jur. § 8, p. 168. Value was alleged and proven and the complaint contains an averment for general damage. 5 Cal.Jur. § 24, p. 189.

We are of the opinion that an action for conversion lies under the circumstances alleged and proven.

The judgment is affirmed.

HAAS, Justice pro tem.

I concur: DORAN, J. I concur in the judgment: YORK, Acting P. J.

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